We try to measure direct transmission of rotational motion between a gear pair, which is called transmission error, without knowing the tooth flank accuracy of each gear. In transmission error measurement, the rotational angle of the shaft of each gear is measured with a pair of rotary encoders. For micro gear engagement, the center distance between a pair of gears is very small, so the rotary encoders have to be small as well as micro gears. A grating disk with a small diameter for a micro rotary encoder must be designed and manufactured. In machining process, one of the MEMS technique is applied. Patterning accuracy is examined in detail.